Winning Against Larger Vendors: Competing in an Established Market

September 14, 2010

Challenging the big fish without breaking the bank

 

While some special start-ups create new markets for themselves, most other start-ups and expansion stage software companies have to compete in established markets with larger, branded competitors. Doing this well is particularly challenging at the expansion stage, as the companies need to preserve the fast growth momentum of the early stage and at the same time develop a profitable go-to market approach to make sure that the expansion capital is well spent. Add to this the challenge of displacing large, well-resourced incumbents and overcoming buyers’ natural reluctance to buy from small vendors, and it can seem insurmountable.

It doesn’t need to be. It has been proven again and again, and our experience has pointed us to a few tried and true strategies to win in these situations:

– Market your product like a winner:

Even though the most common market entry strategy is to offer drastically lower prices to disrupt the market, it has been proven that in competing against established competitors, simply lowering your price might not be the most effective strategy. Instead, a combination of attractive pricing and aggressive, value-focused marketing allow smaller firms to gain more mindshare and advantage in competitive situations. Your messaging signals to the market that your company offers a credible alternative.

– Leverage your organizational agility:

A smaller competitor wins by finding under-served niches or angling at the weaknesses of the larger incumbents. Having a smaller organization, you should leverage your ability to move quickly to respond to any opportunity arising in the market, in contrast to the slow moving reaction of larger vendors. You should be able to reallocate your resources on the fly and capitalize on the changing market conditions. Ideally, the company should stay agile even as it grows into a large company, otherwise it will fall prey to smaller upstarts in the same way it undermined its older competitors.

– Sell selectively:

A smaller vendor should focus on winning the segment of the market that they can win in, and have reasonable chance of success. As Vinnie Marchandani notes in his blog post about Southwest Airlines competitive strategy, some buyers will NEVER consider a vendor without a brand name simply because of the brand recognition factor. Some buyers only cursorily consider smaller vendors as a formality in their process. Sales cycles and resources should not be wasted on those. The sales team needs to be alert enough to pull out as soon as possible, and focus their energy on prospects that are more viable.

– Build lasting relationships with your customers and prospects:

Great marketing, competitive positioning and effective selling can only take you so far. To win more customers from established vendors, it takes TIME: time to build credibility, time to establish thought leadership in the market, time to prove your product’s value. Thus, market challengers need to look at their customer development as long term relationship building that results in mutually beneficial partnerships with customers and prospects. Even with lost prospects who go with existing vendors, you can still develop a relationship based on education information exchange that might lead to a later sale.

Chief Business Officer at UserTesting

Tien Anh joined UserTesting in 2015 after extensive financial and strategic experiences at OpenView, where he was an investor and advisor to a global portfolio of fast-growing enterprise SaaS companies. Until 2021, he led the Finance, IT, and Business Intelligence team as CFO of UserTesting. He currently leads initiatives for long term growth investments as Chief Business Officer at UserTesting.